Treasury Wine Estates (TWE) has reported a net profit after tax of AUS$42.3 million for the full year. Earnings before interes and tax (EBITs) stood at $209.2m. Net sales revenue was up 1.9%.

CEO David Dearie said: “As expected, fiscal 2013 was a challenging year for TWE compounded by the tough decisions taken to address excess inventory in the US. The EBITS result of $209.2m is below the earnings provided on July 15 due to a non-cash, unrealised loss on foreign exchange options of $7m.”

Concerning its decision to dump surplus wine, the company report said: “The decision to reduce inventory levels in the United States is designed to protect brand health and assets in that crucially important market. A balanced approach of measures including the destruction of old and obsolete, predominantly commercial stock, shipping fewer cases to distributors and providing additional D&R (discounts and rebates) investment will address excess inventory at the distributor and retail level. However, because of the long-term agricultural nature of the wine business, TWE has produced wine from past vintages in expectation of these sales.

“Consequently, as a result of this one-off reduction in inventory levels, TWE has written down to net realisable value the corresponding bulk and finished wine.”

On general business performance, it says: “Despite a difficult operating backdrop which combined increased cost of goods sold and reduced supply of luxury and masstige (mass and prestige) wines in the first half of the year, TWE saw solid brand and profit growth in three of four key regions. Collectively, EMEA (Europe Middle East, Africa), ANZ (Australia, New Zealand) and Asia reported 17 percent EBITS growth in fiscal 2013.

On regional growth the reports states: “The EMEA region delivered a solid improvement in EBITS of $16m reflecting a focus on sustainable volume growth. Focused brand building and enhanced distribution contributed to TWE outperforming the total UK bottled wine market in terms of volume and value growth in the second half of the year, with Wolf Blass a key contributor.

"Asia enjoyed another year of strong EBITS growth, up 35.6% to $54.5m as TWE allocated more of the 2013 Penfolds luxury and icons release to meet growing consumer demand in to the region. TWE outperformed the Australia, New Zealand and imported wine category in key Asian markets, demonstrating a continued focus on execution and the benefits of increased investment in brand building and people. Wolf Blass remains the number one wine brand in Hong Kong and the number one Australian wine brand in Singapore, while Japan became Beringer’s largest export market in Asia.

“The ANZ EBITS result of $110.1m reflects 6.5% growth in volume due to increased depletion momentum in the second half of the fiscal year, underpinned by a targeted campaign to drive growth in the masstige portfolio. An excellent result in a market that declined 1.5% in the second half of the year and by 0.9% over the full year," says the report.

On the outlook for fiscal 2014 Dearie: “While fiscal 2013 wad a challenging year for TWE, the fundamentals of the global wine industry have not changed. The supply and demand cycle is moving towards balance and global consumer demand for premium wine brands continues to grow.

“We remain focused on investing in and supporting our portfolio of iconic brands, with planned brand building investment expected to increase significantly in fiscal 2014 as we continue to drive higher volume and sales growth.

Actions to address excess commercial inventory in the US is expected to impact our fiscal 2014 EBITS by up to $30m. With many variables in fiscal 2014, TWE is providing EBITS guidance in the range of $230m to $250m. This accommodates the reduction of shipments in the US and current Australian dollar spot rates.

“Two key drivers will result in lower first half EBITS. Firstly the US shipment realignment is weighted towards the first half of the year and secondly we intend to increase brand building investment, across Asia by up to 70%, also weighted to the first half and ahead of volume growth.

The depletion outlook for the US is expected to improve as a consequence of our recent actions and the EBITS outlook for our EMEA, Asia and ANZ regions is for full year growth,” states Dearie.